The U.K.’s financial watchdog has eased restrictions on hedge funds after relaxing rules on short selling, and slashing administrative and reporting requirements.
The shift marks a major step-change in the way the Financial Conduct Authority regulates investors who bet against the value of companies, and comes as part of a broader U.K. push to cut red tape.
The FCA, which oversees U.K. financial services firms and markets, said Thursday its new framework provides “clearer and simpler” rules on short selling.
Short selling — a core component of many hedge fund strategies — involves investors betting against a particular stock or security, with the aim of profiting from a decline in its value.
The practice has often come under fire for destabilizing markets and accelerating sharp sell-offs during bouts of extreme volatility and pushing vulnerable companies into distress. But the FCA said shorting techniques play a crucial role in facilitating price discovery, liquidity, and risk management in financial markets.
